UPS: United Printing Service?

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UPS (NYSE: UPS  ) , will you never learn?

From time immemorial, the nation's greatest success story in private shipping has taken its cues from smaller rival FedEx (NYSE: FDX  ) . Any time FedEx makes a pricing move, you can be sure UPS will follow. But while I can see some logic in UPS tracking FedEx on fuel surcharges and the like, I cannot fathom its latest move:

UPS: United Printing Service
UPS started off this week with an announcement of what -- I can only assume -- it considered fantastic news. The company believes it has found:

[A] real need in the marketplace ... for an online printing platform that is easy to use ... and is supported by a convenient network of physical locations ... [UPS is now offering an] online printing solution. With more than 4,400 locations, The UPS Store franchise anticipates its sheer size and accessibility will position it as a leader in the online printing arena.

Sounds great, UPS. There's just one problem -- the "marketplace" already has this service. It's called "FedEx Office," and it's bleeding red ink all over the marketplace's nice, new carpet.

While FedEx is too embarrassed to break out Office results separately, its SEC filings show FedEx's "Services" segment (in which Office resides) to be its worst performer, losing $800 million on $2 billion in revenue last fiscal year. Hardly a quarter goes by without FedEx mentioning an "asset impairment charge" it's been forced to take on the business.

Now don't get me wrong -- UPS is losing money in its analogous business, too ("Supply Chain & Freight," which houses the UPS Store). That has to sting, given that UPS prides itself on its "sheer size." Yet smaller, more focused office support operations like Staples (Nasdaq: SPLS  ) seem to have no problem turning a profit in this business.

Quit while you're ahead
Still, UPS can take pride in one fact: FedEx Office is gushing red ink, while UPS has kept its losses to a trickle. So more's the mystery that UPS wants to double down on this bad idea, and imitate FedEx again. I mean, if FedEx couldn't turn a profit with the premier name in printing -- Kinko's -- what chance does UPS have?

Sure, in theory, there should be synergies here. Get customers to print their docs with you, and they're more likely to ship those docs on your trucks. But synergies only get you so far, UPS. My advice: Don't spend too much time and money repeating FedEx's mistakes.

Focus on what you're good at: Moving stuff from Point A to Point P(rofit).

Read more about FedEx as it delivers some good news, and give us your take on UPS's latest brainstorm at Motley Fool CAPS or in the comments below.

Fool contributor Rich Smith does not own shares of any company named above. FedEx and Staples are Motley Fool Stock Advisor picks. United Parcel Service is a Motley Fool Income Investor recommendation. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 17, 2009, at 10:53 AM, UPSStoreOwner wrote:

    I own a UPS Store. Let me tell you, the print biz has potential for us. But you missed the real story. By a mile. Try the web site and analyze its quality vs Staples. The execution is the real story. What can Brown do for you? Try the web site and see.

  • Report this Comment On September 17, 2009, at 12:25 PM, TMFDitty wrote:

    UPSSO --

    Your entirely understandable bias aside, I will say this: I have visited the site, and it does look good. Attractive layout, and it seems easier to navigate than FedEx's (in my lay opinion).

    Still, I'm sticking with my opinion: A "better" product does not a "good" idea make.

    Foolish best,

    Rich Smith

  • Report this Comment On September 19, 2009, at 9:18 PM, docrutter wrote:

    This article is right on-- profitability is a different story for the licensor of UPS Stores and franchise owners. If you run your store on good fundamentals, you sure can turn a profit-- but we're talking about corporate. UPS and FedEx, like the author mentioned, are hurting in these two segments-- maybe Staples should start an airline, or not...

  • Report this Comment On September 21, 2009, at 9:39 AM, rfaramir wrote:

    If the UPS Stores already have the printers and the networking, then this offering is a low cost increment. If its entrance lowers prices for the service globally, this hurts its competition.

    Thus it is a win.

    If UPS is investing a lot of money in this effort, then the article is right, and it is a stupid loss.

    Does anyone (perhaps UPSStoreOwner) know (and can divulge) the facts of the case?

  • Report this Comment On September 22, 2009, at 1:40 PM, tupssownertoo wrote:

    To the owners on here, you pay your NAF with your royalties and have no real choice where it goes so this sort of negativity shouldn't really affect your business. If you've never had a lot of printing and this campaign generates no printing currently then you really have lost nothing. It shouldn't be a big deal that MBE is spending your royalties on this or any other ad campaign. Local marketing is the only true advertising that gains you the customers that live near your store. National marketing is inherently designed to get the UPS name out there and not The UPS Store specifically. That's why we don't have our own logo. If you don't like the direction MBE is taking the franchises, list your store for sale and find another franchise that treats it's owners any better.

  • Report this Comment On September 23, 2009, at 7:57 PM, ncduvall wrote:

    As a store owner, I wouldn't even consider online printing to be a "UPS" product. The UPS Stores are a franchise operation owned by MBE (MailBoxes Etc.). We pay a royalty fee to UPS for the branding and national advertising. We consider ourselves to be a shipping client of UPS. Having said that, The UPS Stores business model is packing, shipping, mailbox rental and document services. The recent addition of the online print ordering system is just a new delivery system for a product we've offered for years.

  • Report this Comment On September 25, 2009, at 7:44 AM, ncwhitehouse wrote:

    "Local marketing is the only true advertising that gains you the customers that live near your store." The same holds true for printing success. Local market based initiatives coupled with an aggressive commercial sales were the primary drivers in Kinko's pre-rollup era profits. FedexOffice with their national cookie cutter approach and on again, off again support for commercial sales will never achieve profits from documents services. The UPS Store are replicating the same cookie cutter - large production center approach and has no inkling to use their existing commercial sales structure to truly sell printing. Brilliant.

  • Report this Comment On March 02, 2011, at 10:37 PM, EdPIker wrote:

    To say that The UPS Store should not continue in the printing business that it has been in since 1982 as MBE stores is ludicrous. Its like arguing that there is no need for the Motley Fool because Merrill Lynch provides all the investment advice the market needs. In fact the Kinko's founder has even attended the UPS Store convention. He appears to view the UPS Store as the likely heir to the premier position in the copy and print shop space.

  • Report this Comment On February 07, 2013, at 4:07 AM, Printing2013 wrote:

    Huax - A manufacturer of Videojet and Domino printer parts and filters

    Huax is a manufacturer of Videojet and Domino printer parts and filters,Videojet filter,Domino filter,Imaje filter,Willett filter and Linx filter.

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